Term Life Insurance - More or Less Expensive?
If you want maximum protection and minimal cost, term life insurance is for you. In my opinion, it is the best source of temporary protection to solve a temporary need. When term is used as a permanent solution to a permanent need, it may no longer be either efficient or effective. In fact, if the insured happened to die one day after the term insurance expired, it would have been an expensive and inefficient safeguard. Otherwise, for short and medium range needs, term is a great solution.
Term life insurance is appealing to people who may not be able to afford a permanent insurance premium but realize that their needs are clearly long-term. Term life insurance can be very helpful to these people in providing the protection they need right away. If they continue to rely on term protection, however, potential consequences may result if their need is permanent. First of all, unless the term is converted to permanent protection, the insurance will be discontinued by the company at the end of the contract term, which could be short of life expectancy age. Well before then, the term premiums that were once so attractively low will have risen to financially prohibitive high levels.
Consequently, if the insured's insurability changes negatively during the term of coverage, it may be difficult or impossible to purchase insurance at the end of the term contract, and at a higher attained age. When the term coverage terminates, so does the protection.
Check your insurance carrier's rates (you can use our free quoting tool). Compare the premium for $100,000 of permanent insurance at age 30 to the same amount of term protection to age 60 (purchased at age 30). Then consider the fact that the term premiums all went to buy "pure insurance." They were "pure" cost, just like a rented apartment. See how that compares to the cash value that has accumulated in the permanent policy by the time the insured is 60. Which would you rather have been paying for all that time?
Term is, however, a valuable addition to your product portfolio, especially if affordability is a major issue. If properly purchased, it can be a flexible and integral part of your life insurance portfolio. The real decision points center around what needs are long term and what are not, or if long-term needs are best addressed with life insurance (which I must admit, in most cases they definitely are!).
About the author: Kyle McDonald holds FIC, FICF, FSCP® & CLTC designations. His viewpoint on life insurance is simple, “Anyone with a family must have life insurance. In the end, life insurance is for others you care about, not you.” He is ready to help you and your family get the best option available. Contact Kyle today at 1-800-651-1953 or KMcDonald@Pivot.com.